The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
High-grade ore to boost Fort Knox gold output to 400,000 oz/yr North of 60 Mining News – July 29, 2022
Roughly 1 million ounces of gold-equivalent is expected to be mined from two small pits at the Manh Choh project in Alaska.
Resident of Tetlin helping with core logging during the drilling that outlined 1 million ounces of gold and 1.7 million oz of silver in reserves in the Peak Gold deposits at Manh Choh.
With the recently completed feasibility study showing an economically robust project, Kinross Gold Corp. has officially decided to move forward with developing a mine at the Manh Choh gold-silver project near the Village of Tetlin, Alaska.
"At Manh Choh in Alaska, we completed a feasibility study ahead of schedule, and are proceeding with a project that we expect will add approximately 640,000 lower-cost gold ounces to our production profile over its life of mine in one of the world's best mining jurisdictions," said Kinross Gold President J. Paul Rollinson.
Being developed under a joint venture between Kinross (70%) and Contango ORE Inc. (30%), the Manh Choh mine detailed in Kinross' feasibility study is expected to produce roughly 1 million gold-equivalent oz, which includes the value of both the gold and silver recovered, over 4.5 years.
This operation is based on 3.9 million metric tons of proven and probable reserves averaging 7.88 grams per metric ton (998,000 oz) gold and 13.6 g/t (1.7 million) oz silver.
The study details a plan to truck high-grade ore mined from two pits at Manh Choh roughly 250 miles to Kinross' Fort Knox Mine north of Fairbanks, Alaska. This ore is to be processed through the existing Kinross Alaska mill and the tailings stored on the Fort Knox property.
With the addition of high-grade ore from Manh Choh, which will be roughly 10 times higher than ore currently being processed through the Kinross Alaska mill, the gold production at Fort Knox is expected to jump to 400,000 oz per year for the currently anticipated 4.5 years of mining at Manh Choh.
Leveraging the existing facilities at Fort Knox eliminates the need to permit, finance, and build a mill and tailings facilities at Manh Choh. Operating what will essentially be a rock quarry operation will also significantly reduce the environmental disturbance and lowers the overall greenhouse gas emissions, compared to developing and operating new processing and tailings storage facilities onsite.
While inflation has pushed up the costs originally estimated for both building and operating the Manh Choh Mine, so have the gold grades.
Kinross had previously estimated that the average grade of Manh Choh ore processed through the mill at Fort Knox would average around 6 g/t gold-equivalent. Based on the geological work carried out over the past couple of years, the average grade is now expected to be 8 g/t gold-equivalent, which is helping to offset most of the inflationary pressures.
The total preproduction capital needed to build the mine is estimated to be approximately $255 million. This includes the development and infrastructure at Manh Choh; modifications to the Fort Knox mill; a fleet of trucks to deliver the ore; and $40 million in contingency.
Based on the Manh Choh joint venture agreement, Kinross' share of this expense is expected to be roughly $190 million. Contango Ore will be responsible for the balance of expenditures needed to get to the first gold pour.
Kinross estimates the average all-in sustaining costs per gold-equivalent oz produced from Manh Choh to be approximately $900, which would result in a margin of over $800/oz at the current price of gold.
For Kinross, this results in a net present value of $165 million and an internal rate of return of 35%.
Contango ORE, which is expected to receive 67,500 gold-equivalent oz per year from Manh Choh, is expected to release a feasibility study based on the economics of its 30% interest in the mine in August.
"Based on all-in sustaining costs estimated by Kinross at $900 per gold-equivalent ounce, the company should generate strong cashflows," said Contango ORE President and CEO Rick Van Nieuwenhuyse.
Given the positive economics, Kinross has officially decided to move forward with development and the Peak Gold Joint Venture has already begun some of the preliminary work, including camp refurbishments and preparation for the start of construction.
"We are very excited to achieve this important milestone for the company and its shareholders," said Van Nieuwenhuyse. "Board member, Curt Freeman and Board Chairman, Brad Juneau discovered this orebody nearly ten years ago through hard work and by applying solid exploration principles. They worked closely with the Tetlin tribe to develop a strong working relationship which Kinross continues today."
Thanks to this strong working relationship, Manh has strong support from the Native Village of Tetlin, on whose land the project is located. Building on this relationship, Kinross signed an extension of the Peak Gold JV's community support agreement with Tetlin.
"Since the beginning, we have had constant communication with the Manh Choh Project team. They have been diligent about keeping us informed and at the table every step of the way. We are respected and valued," said Native Village of Tetlin Chief Michael Sam.
Kinross says it is also continuing comprehensive local community programs and prioritizing local economic benefits as it develops the project.
Manh Choh is expected to generate 400 to 600 new jobs, support the more than 700 existing jobs at Fort Knox, and build on Kinross' commitment to environmental stewardship and strong history of responsible mining in Alaska.
The first gold is expected to be poured from Manh Choh ore in the second half of 2024.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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